Director and Officer Liability Issues Faced by Executives of Distressed Companies

How directors and officers can defend their actions in a hypothetical insolvency situation is discussed. The primary defense is the business judgment rule. Succinctly, this asks questions to determine culpability, including: 1. Did you do something disloyal to your corporation in which you benefited...

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Bibliographic Details
Published inThe Secured Lender Vol. 60; no. 1; p. 18
Main Author Epstein, Michael J
Format Trade Publication Article
LanguageEnglish
Published New York Secured Finance Network (SFNet) 01.01.2004
Subjects
Advisors
Boards of directors
Capital markets
Cash flow
Corporate profits
Cost control
Directors
Insolvency
Investment bankers
Liabilities
Litigation
Stockholders
United States > US
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Summary:How directors and officers can defend their actions in a hypothetical insolvency situation is discussed. The primary defense is the business judgment rule. Succinctly, this asks questions to determine culpability, including: 1. Did you do something disloyal to your corporation in which you benefited at the corporation's expense? 2. Did you exercise a duty of good faith in your affairs on behalf of the company or did you cover up your sins? 3. Did you practice a duty of reasonableness in that you followed or knowingly ignored the advice of professional advisors, resulting in the company's loss? In the near term, everyone should expect to see an increase in D&O litigation surrounding business failures. The most visible activity will result from claims against directors over not having protected all stakeholders, while pursuing the hopes and dreams of investors.
ISSN:0888-255X